WTO Dispute Settlement in 2016:
BLUE SKIES OR STORM CLOUDS AHEAD?
In 2015, the WTO Dispute Settlement Body faced unprecedented
challenges. Many consider the large number of dispute reports a
testament to the success of the WTO’s dispute settlement system,
but others fear that the future success of that system is by no means
assured. Recently, there have been delays in the dispute settlement
process. Some argue that the factual intensity and overall complexity
of disputes is pushing the limits of the system’s capacity and stretching
the resources of the WTO’s Secretariat to the breaking point.
Moreover,
the limited outcomes of the recent Nairobi Ministerial Conference
demonstrate that the WTO’s negotiating branch itself is beset with
stasis and challenges, leading WTO Members to look more frequently
to the dispute settlement system for answers to problems that cannot
be overcome through negotiations. A further challenge emerges with
the conclusion of the Trans-Pacific Partnership Agreement (TPP), and
progress on other “mega-regionals.” Some suggest that the dispute
settlement mechanisms in regional trade agreements (RTAs) may
offer appealing alternatives to the WTO, especially where underlying
disciplines in RTAs are more expansive than those offered under the
WTO covered agreements.
Sidley’s Geneva team, in an initiative led by Christian Lau and Jan Yves
Remy, brought together a panel of five leading WTO law practitioners
to talk freely about these challenges. The panel for “WTO Dispute
Settlement in 2016: Blue Skies or Storm Clouds Ahead?” included James
Flett (EU Commission, Legal Service); Professor Gabrielle Marceau
(Professor, UNIGE and Counselor, WTO Legal Affairs Division); Koji Saito
(Director, Japan’s Ministry of Foreign Affairs); Iain Sandford (Partner,
Sidley) and David Unterhalter (Former Appellate Body Member).
Jan
Yves Remy moderated the session.
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. Gabrielle Marceau kicked off the discussion, introducing the topic of
interaction between RTAs and the WTO. The panel debated a number
of points. It was suggested that RTA dispute settlement mechanisms will
never replace those of the WTO. They nevertheless played a useful role
in providing new ideas that could one day be incorporated into the WTO
dispute settlement framework.
The recent Appellate Body decision in
Peru – Agricultural Products confirmed that the Appellate Body is clearly
not in favour of allowing RTA provisions to displace or exclude the role of
the WTO dispute settlement system in applying the disciplines of the
WTO covered agreements.
The panel addressed the interesting question of whether the WTO could
be used as a forum to resolve disputes under RTAs. The WTO’s institutional
experience and capacity means that it could, in principle, provide a
useful framework for resolving issues arising beyond the WTO covered
agreements. The possibility of connecting WTO dispute settlement and
the proposed Trade in Services Agreement (TISA) was raised.
So too was
the possibility that special terms of reference for WTO panels, or a WTO
arbitration, could address WTO-plus issues relating to RTAs, even without
any formal change to the WTO Agreement.
Koji Saito introduced a discussion of the institutional balance between
the WTO’s dispute settlement system and the “political” organs through
which Members make new rules and administer existing ones. The group
discussed the slow progress of multilateral negotiations and the pressures
placed on dispute settlement. It was suggested that the system itself could
handle this perceived “disequilibrium,” and that it had not appeared to
trigger judicial activism thus far.
There is a possibility, however, that there
may be a need to move away from the consensus principle in the future.
The experience within the European Union’s political system could well
serve as an example of how this could evolve.
A question was raised about the role of WTO committees in refining
and developing new rules and principles to address trade issues. Do the
Appellate Body’s decisions in U.S. – Clove Cigarettes and U.S.
– Tuna II
(Mexico), which relied on WTO Committee Decisions as “subsequent
agreements” relevant to the interpretation of treaty provisions, provide
an approach that allows panels and the Appellate Body to take account of
Members’ decisions other than formal Ministerial Conference decisions?
Several panelists emphasized that committee decisions are decisions by
Members which should be respected. The WTO should be proud of its
regular work, including that of committees. Indeed, there is a question of
whether the concept of “negotiating rounds” is outdated; instead, the WTO
should be understood as a permanent forum for ongoing negotiations.
.
WTO Dispute Settlement in 2016:
BLUE SKIES OR STORM CLOUDS AHEAD?
Turning to the problems besetting the dispute settlement
system itself, David Unterhalter led a discussion focused
on possible procedural innovations. It was noted that the
current system lacks many of the procedural innovations
seen in domestic systems and also lacks rules customized
to the different types of proceedings. However, in
discussion, the panel agreed that it is possible to introduce
at least some procedural innovations, even in the absence
of formal reform. In order to increase the efficiency of
proceedings, it is important, for instance, to clearly
distinguish which facts are in dispute.
Panels should be
encouraged to identify factual findings more clearly, and
parties should work harder to identify agreed facts. It was
suggested that provisions relating to “good offices” could
be used to facilitate the identification of agreed facts,
thereby relieving the panel — and the system generally —
of unnecessary complexity and delay.
Another area in need of reform relates to the use of
expert evidence in WTO dispute settlement. In David
Unterhalter’s view, mechanisms could be developed to
ensure that experts from both parties work together to
narrow down their different assessments to the points of
real contestation.
Others commented that experience so
far with “expert testimony” at the panel stage revealed
that it may be effective, but its utility in the WTO context
was limited in the absence of a process for crossexamination. It was suggested that one option for reform
may be the adoption of working procedures mandating
that evidence not be accepted unless experts are available
for questioning during the substantive meetings of the
panel with the parties. One panelist emphasized the
tension regarding the WTO standard of review, whereby,
on the one hand, panels are cautioned not to re-assess the
facts, including the level of risk (for instance in SPS cases),
and, on the other hand, panels are assisted by experts to
better assess such risks.
James Flett then led the panel in a discussion of the use of
economic evidence in WTO disputes.
While acknowledging
that economic analysis and expert evidence usually
contribute to WTO dispute settlement, the costs to
the system and the parties need to be considered. For
example, in the context of a “retaliation” arbitration
involving the quantification of the level of nullification
and impairment, it is questionable whether the degree of
economic analysis being undertaken is warranted. Panelists
agreed that in some cases economic analysis may not be of
much help, but noted that there were some concepts under
the covered agreements that, to be properly interpreted,
required the help of economists and economic evidence.
As a practical matter, there is some inevitability to the
“arms race” of providing economic evidence as litigants
become more and more sophisticated in their use of
economic arguments to buttress their cases.
In the current
environment, it is important that adjudicators have access
to economic expertise to decide the evidence being
presented to them.
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. To close, Iain Sandford highlighted several points relevant to the manner
in which state-owned enterprises (SOEs) have become an increasingly
prominent feature in dispute settlement in the last 20 years. He argued that,
in recent years, Members have increasingly used trade remedy measures
to address alleged distortions caused by SOEs, for instance, through use
of normal value cost adjustments in dumping cases or when identifying
subsidies. Discussion among the panelists highlighted that new trade
agreements, notably the TPP adopted specific, WTO-plus rules for SOEs.
There was some debate about whether specific rules for SOEs were necessary
or appropriate. It was notable, nevertheless, that disputes arising from
WTO-plus SOE rules in TPP would inevitably be litigated under the TPP
dispute settlement framework.
The panel highlighted that issues pertaining
to SOEs are not limited to emerging economies, but also impact “older”
WTO Members, which is especially important to consider in the regulation
of energy markets.
Jan Yves Remy wrapped up the discussion by returning to the theme of the
session: blue skies or storm clouds ahead? The discussion showed that both
sunscreen and umbrellas are required as Members continue to deal with
new challenges from both outside and within the existing WTO dispute
settlement system.
This article has been prepared for informational purposes only and does not constitute legal advice.
This information is not intended to create, and the receipt of it does not constitute, a lawyer-client
relationship. Readers should not act upon this without seeking advice from professional advisers.
The content therein does not reflect the views of the firm.
Contacts
CHRISTIAN A. LAU
JAN YVES N.
REMY
IAIN SANDFORD
Associate
Geneva
+41 22 308 0033
clau@sidley.com
Associate
Geneva
+41 22 308 0046
jremy@sidley.com
Partner
Geneva
+41 22 308 0042
isandford@sidley.com
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